Background: Neptune Orient Lines (NOL) is a Singapore-based global shipping and transportation company. Its shipping line arm, APL, provides container shipping, terminal services and intermodal operations. Its logistics business, APL Logistics, engages in international end-to-end logistics services and solutions.
Recent development: NOL’s August freight rate slid by 20% YoY to US$2,559/FEU but was flat MoM. This came in below market expectation as a result of (1) weaker rates in the Asia-Europe trade and (2) increased mix of short-haul intra-Asia route. However, shipping volumes of 235,200 FEU remained relatively robust, led by growth (+8.0% YoY) in the major trade lanes.
Key ratios…
Price-to-earnings: nm
Price-to-NTA: 0.76x
Dividend per share / yield: na
Net cash/(debt) per share: (S$0.358)
Net gearing: 30.0%
Share price S$1.135
Issued shares (m) 2,583.264
Market cap (S$m) 2,932.00
Free float (%) 32.1%
Recent fundraising activities June 09: Raised US$0.96b via a 3-for-4 rights issue @ $1.30
Financial YE 31 December
Major shareholders Temasek Holdings (67.3%); JF Asset Management (0.71%)
YTD change -47.9%
52-wk price range S$2.40-0.98
Our view
Huge capex commitment. NOL has approximately US$2.9b of vessel installment payments until 2014, which will be financed through a combination of bonds and committed ship financing. As of 1 July 2011, it still has about US$1.0b of the US$1.5b MTN programme yet to be utilised. Based on our ballpark estimates, net gearing will increase to about 0.65x in FY12.
Another rights issue on the cards? In June 2009, NOL did a major 3-for-4 rights issue (RI) whereby Temasek agreed to sub-underwrite the entire proposed RI. Management believes the net proceeds of about US$0.96b have helped to strengthen the group’s balance sheet at the time (net gearing before the equity raising was 0.45x), as well as provide financial flexibility to acquire any potential distressed assets.
Inexpensive valuation but can wait further. While the stock currently trades at a relatively undemanding 0.76x FY11E P/B, we do not think it is time to buy yet given the uncertain economic outlook. During the 2008 global financial crisis, it has traded briefly to a trough P/B of 0.4x.
No comments:
Post a Comment